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Old 02-05-2016, 07:51 AM   #121
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serie1926 -
There is a "Quote" button at the bottom of each post. This will automatically include a link to the post you are quoting, and display who you are quoting. It makes it much easier for folks reading your responses with quotes to follow. If you're using the mobile app you tap the post you want to quote and the option to quote will appear at the top of the screen.

I hope this helps.
Brilliant! Learn something new everyday. Thank you!
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Old 02-07-2016, 10:04 AM   #122
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The reason I started participating in "retirement forums" was to gain experience from others who weren't willing to trade any more life for more money (and the other assorted nonsense of having a j*b). But I'm in an entirely different sphere than those who are trying to maintain a $200k/yr lifestyle. Granted, everyone has to live on whatever they have accumulated, but it just seems more challenging to retire on $0.5m than to retire on $5.0m. It's a nice problem to have; I just can't relate...
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Old 02-07-2016, 10:17 AM   #123
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It is?

I thought it was for finding the point where your portfolio would be depleted if, and only if, the future was as bad as the worst of the past (depending what % historical success you used).

And with the default 95% success rate, that means that 95% of the historical time periods, your portfolio would not be depleted. And ~ 1/2 the time you have as much buying power as when you started, and sometimes MUCH more.

-ERD50
This is a good comment! I'd be interested to learn what others believe FC does or at least a confirmation.

If the above is true, it is news to me in a way. Something I sort of knew but hadn't had it spelled out so clearly.

Anyone?
Well, please do your own due diligence on it, that's always best, but I was not expressing it as an opinion, I was stating it as a fact. It really is what FireCalc does. See the refs that REWahoo provided as well.


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That's no fun. We have to try harder to deplete it! So far, we have doing a poor job after 14 years, in spite of occasional market swoons.
And that's fine, but always a bit tough, as we never know what the future offers, and conservative people like to keep a buffer.

But there are withdraw methods that can help. I forget the name offhand, the boglehead wiki probably discusses it, but essentially using the RMD tables as a start, and using a WD rate that is designed to draw down your portfolio as you age. They make it more conservative by subtracting ten years or so from your age, so tyou are still leaving some in reserve.

Over-simple example (check the RMD tables and sources) - if you plan to deplete your portfolio in 20 years, your WDR for that year is 1/20th of your portfolio (5%). Next year it is 1/19th (5.26% of remaining portfolio), etc. Basically like that.


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Old 02-07-2016, 10:25 AM   #124
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"I'll bite. To answer your question, last year we were at $5M investable. The correction has put us under now by about 10%. Fortunately, we keep about 8% of our investable assets in cash, so we don't dip into the portfolio in a downturn. We live on a budget of under 100K per year, usually more like 65-70K, with no debt. ...
While that would be a generally accepted conservative 2% WR, I just realized you are also posting in another thread that you use an FA that you are happy with. If that FA charges the typical 1% (I don't think you ever came back to address fees), and puts you in funds with higher than 0.18% ERs used as the default in FIRECalc, that 2% WR is not as conservative as it appears on the surface. Maybe even far worse if those FA funds under-perform (before fees - so we don't double count them) a simple index approach, which statistically, is likely the case.

edit - ooops, I guess your not using the quote function threw me off, that is maybe directed at someone else? Either way, the point stands.

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Old 02-07-2016, 10:43 AM   #125
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While that would be a generally accepted conservative 2% WR, I just realized you are also posting in another thread that you use an FA that you are happy with. If that FA charges the typical 1% (I don't think you ever came back to address fees), and puts you in funds with higher than 0.18% ERs used as the default in FIRECalc, that 2% WR is not as conservative as it appears on the surface. Maybe even far worse if those FA funds under-perform (before fees - so we don't double count them) a simple index approach, which statistically, is likely the case.

edit - ooops, I guess your not using the quote function threw me off, that is maybe directed at someone else? Either way, the point stands.

-ERD50
Can we please quoting 1% as "typical." I would call it "ridiculous," "excessive", or even accept "all too common." But "typical" gives it the sort of inevitability and cloak of acceptability it does NOT deserve. Psychologically this is called "anchoring."

There are many different options for FA fees and the sooner we knock the legs out of the absurd notion that 1% is the reference, the better off consumers will be.

N. B. - I pay a flat fee that thanks to the size of my portfolio amounts to less than 0.07%. As my portfolio grows only I benefit by getting more money. The FA gets the same money for the same work and I pay an even lower percentage.


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Old 02-07-2016, 10:54 AM   #126
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Can we please quoting 1% as "typical." I would call it "ridiculous," "excessive", or even accept "all too common." But "typical" gives it the sort of inevitability and cloak of acceptability it does NOT deserve. Psychologically this is called "anchoring."

There are many different options for FA fees and the sooner we knock the legs out of the absurd notion that 1% is the reference, the better off consumers will be.

N. B. - I pay a flat fee that thanks to the size of my portfolio amounts to less than 0.07%. As my portfolio grows only I benefit by getting more money. The FA gets the same money for the same work and I pay an even lower percentage.


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Once again, we need to put this in context. The US has the lowest MERs, because of competition and economies of scale. Fees are much higher in the UK and other European countries, as they are in Canada.

Management expense ratio - finiki, the Canadian financial wiki
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Old 02-07-2016, 11:09 AM   #127
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Granted, everyone has to live on whatever they have accumulated, but it just seems more challenging to retire on $0.5m than to retire on $5.0m. It's a nice problem to have; I just can't relate...
Curious as to which end you cannot relate to. $.05M or $5M?
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Old 02-07-2016, 12:21 PM   #128
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Curious as to which end you cannot relate to. $.05M or $5M?

The bigger of the two... I'm in the smaller of the two group, btw.
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Old 02-07-2016, 12:55 PM   #129
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I think the idea is that trading a few OMYs vs cutting back on a 200K/yr spend would be an obvious decision to many. For those who are happy retiring at the median US household spend, a 5M nest egg has significantly overshot the mark so the "is this enough" question seems ludicrous. The implication is that anyone spending 4x the median must have a large discretionary component that can be reduced painlessly. I think most on this board would trim expenses by ~20-30% to ER at this point, but there are several who would not make this choice for various reasons.

I haven't retired yet and my net worth is usually higher at year-end, but not always-- and the reason is not high spending (drop would still occur with zero spending). FWIW I would not withdraw 200K/yr on a 5M portfolio unless I was past RMD age. The other poster who takes out 70K/yr on a 4.5M portfolio is depleting at a rate I would feel comfortable with (age 50-ish). I would include a rolling average of taxes and FA fees in the withdrawal amount.
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Old 02-07-2016, 01:22 PM   #130
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The implication is that anyone spending 4x the median must have a large discretionary component that can be reduced painlessly. I think most on this board would trim expenses by ~20-30% to ER at this point, but there are several who would not make this choice for various reasons.
Perhaps but not always. Really depends on how much you like or dislike your job. For some the money is just "hanging there". Why wouldn't you pick some more. Obviously within reason.
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Old 02-07-2016, 01:50 PM   #131
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Perhaps but not always. Really depends on how much you like or dislike your job. For some the money is just "hanging there". Why wouldn't you pick some more. Obviously within reason.
Agree with this. We like our jobs and have continued working so as to have, hopefully, large discretionary spending in retirement. We've always planned on a higher discretionary spend rate than we've had while working, so we didn't see any problem in working a bit longer for "fluff." But, there are limits--we need to be young enough to handle the adventures we desire!
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Old 02-07-2016, 06:32 PM   #132
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Can we please quoting 1% as "typical." I would call it "ridiculous," "excessive", or even accept "all too common." But "typical" gives it the sort of inevitability and cloak of acceptability it does NOT deserve. Psychologically this is called "anchoring." ...
I understand where you are coming from on this, but unfortunately, the "ridiculous," "excessive" do seem to be typical as well. I'm not sure that using the phrase 'typical' implies acceptability though? At least I don;t think of it that way, though maybe I'm off-base on that. But I still find it interesting that you see it that way - do others?


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There are many different options for FA fees and the sooner we knock the legs out of the absurd notion that 1% is the reference, the better off consumers will be.

N. B. - I pay a flat fee that thanks to the size of my portfolio amounts to less than 0.07%. As my portfolio grows only I benefit by getting more money. The FA gets the same money for the same work and I pay an even lower percentage.
But we can't stop referencing it as such until it changes.

-ERD50
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Old 02-07-2016, 06:47 PM   #133
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I understand where you are coming from on this, but unfortunately, the "ridiculous," "excessive" do seem to be typical as well. I'm not sure that using the phrase 'typical' implies acceptability though? At least I don;t think of it that way, though maybe I'm off-base on that. But I still find it interesting that you see it that way - do others?




But we can't stop referencing it as such until it changes.

-ERD50
Perhaps a better term is customary just like 6% commissions on real estate sales are customary.
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Old 02-07-2016, 07:29 PM   #134
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The reason I started participating in "retirement forums" was to gain experience from others who weren't willing to trade any more life for more money (and the other assorted nonsense of having a j*b). But I'm in an entirely different sphere than those who are trying to maintain a $200k/yr lifestyle. Granted, everyone has to live on whatever they have accumulated, but it just seems more challenging to retire on $0.5m than to retire on $5.0m. It's a nice problem to have; I just can't relate...
And really fun. Back in the early days of this forum we had threads on much lower budgets.

I consider this thread a flip side to the 'Four Yorkshiremen'. The numbers/lifestyles have elements of truth interspersed with humor.

heh heh heh - we've come a long way baby!
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Old 02-07-2016, 07:45 PM   #135
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I understand where you are coming from on this, but unfortunately, the "ridiculous," "excessive" do seem to be typical as well. I'm not sure that using the phrase 'typical' implies acceptability though? At least I don;t think of it that way, though maybe I'm off-base on that. But I still find it interesting that you see it that way - do others?




But we can't stop referencing it as such until it changes.

-ERD50
But that is the point...it has changed. And I think we can reference it in a better way. As was pointed out by someone else, much has changed in investing with technology that makes it much easier to do it yourself. It also has made it easier for the financial advisors, which is why many can now charge less than what used to be "typical" or "customary." Just as technology has made computers and TV's cheaper, it has made financial planning and portfolio management cheaper. There is a concerted effort by some to maintain this notion that 1% is typical, customary or even "appropriate." It's understandable, but it is plainly and simply an attempt to anchor the price. We consumers don't have to repeat it. Language matters. (See Frank Luntz's career) The power to change starts with us. Every time 1% is mentioned, I think the many lower priced options should be mentioned.



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Old 02-07-2016, 08:05 PM   #136
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How much will taxes on portfolio income eat into that 220K?

When you aren't working, you have a lot more time available to spend money!
Portfolio generated $130k in the taxable portion last two years. That's gets taxed at 0%. I can convert a chunk of IRA to Roth before any taxes have to be paid. Then the marginal rates are high for both capital gains and income.
I don't plan to generate much if any capital gains that are taxable. I gift some appreciated stock to my minor kids and use the money to fund them. Have to keep gains in the $2k region to avoid kiddie tax but the marginal rate there will be lower than mine because of phase outs.
I can do some tax loss harvesting to get some more money out I guess if I need to.
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Old 02-08-2016, 09:46 AM   #137
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...There is a concerted effort by some to maintain this notion that 1% is typical, customary or even "appropriate." It's understandable, but it is plainly and simply an attempt to anchor the price. ... Language matters.
...
I guess we will have to agree to disagree (at least I will!). I understand what you are trying to say, I just don't agree that using the word "typical" as a descriptor is any way condoning, accepting it, inferring it is appropriate, anchoring it, or anything like that. It is merely describing it. Language does matter - look up "typical" in your Funk & Wagnall's - I don't see anything of the sort.


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The power to change starts with us. Every time 1% is mentioned, I think the many lower priced options should be mentioned.
I think the alternatives normally are mentioned. And I agree that they should be, but it may get omitted from time to time, as being 'common knowledge' here. In fact it is usually in the context of DIY and low cost index funds. And I typically (!) see it mentioned that there are a few places that charge the lower fees (Rick Ferri?), or recc to hire a one-time (or occasional) review, rather than pay each and every year.

-ERD50
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Old 02-08-2016, 02:25 PM   #138
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Are we really debating the difference between the words 'typical' and 'customary'?

Or am I misunderstanding? (I do that a lot)
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Old 02-08-2016, 02:35 PM   #139
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Are we really debating the difference between the words 'typical' and 'customary'?

Or am I misunderstanding? (I do that a lot)
Not all of us arguing it - just some folks.
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Old 02-08-2016, 03:00 PM   #140
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Are we really debating the difference between the words 'typical' and 'customary'?

Or am I misunderstanding? (I do that a lot)
I don't know, I was just trying to address the other poster's comments. I don't think there is any debate, unless one wants to have that debate with the dictionary?

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